How to Run a Lean Marketing Budget While Growing Your Startup

You see a Slack notification pop up from your CFO and your heart drops. It seems like every tech company is announcing layoffs and for those that haven’t cut headcount, cost-cutting exercises are already underway in many marketing departments. Take a breath. You don’t have to be worried. Great companies and brands are built in down times; Airbnb, Slack, WhatsApp, Square, and Uber were all founded during the height of the Great Recession. It’s possible to build your brand, deliver customer growth, and do so on a lean marketing budget. It just takes a willingness to stay scrappy, iterate quickly, and understand what customer problems you really solve. 

The best startups are clear on their cash burn and the best marketing teams have budget discipline all the time. This guide will walk you through how to create that dynamic in your team (and no, this isn’t focused on reducing media budgets or cutting headcount).

Understand How to “Own Your Numbers"

If your CEO asked you for an update on growth, you’d know your acquisition numbers immediately. But if budget or progress on growth objectives are never brought up in your weekly team meetings or marketing reviews, then numbers are not being given any importance in your team’s culture. 

Many members of your team may have only lived through “up and to the right” times in their careers thus far, so it’s important to find ways to help them understand what it means to own their numbers and why that's important for creating a solid lean marketing budget.

Everyone should know their individual and team objectives (on customer value, media spend, and budget) and how they’re progressing on their targets. Extend this philosophy to include your cross-functional partners.

This might mean pairing with data science to evaluate how customer or cohort values change over time or working across marketing sub-teams to understand how performance and brand tactics relate to each other in the budget mix.

As an example, when a previous company of mine moved from a B2C business to a platform that had SMB and enterprise clients, we had to work with our finance team to understand changes to payback periods. We moved from investment thresholds that were based on 12 months of consumer customer value (and premised on lower B2C acquisition costs) to a model that had different investment tiers that recognized a range of customer values across industries. 

Ultimately knowing your numbers is about helping your team understand that any marketing has an impact on your startup’s cash burn and, ultimately, lifespan. Spending money is not inherently bad and is necessary in marketing, but if you help your team understand how different investment approaches relate to the company’s overall success, particularly in a cash constrained environment, you will help create number ownership.

Be Open to Diversifying Your Marketing Channel Mix

Having a diversified channel mix is a key component of successful startup marketing. 

Putting all your eggs in one basket is a serious risk you don’t want to make your young company face. Just look at what Apple’s privacy changes have done to certain brands—Snap previously blamed the changes for sluggish growth and Peloton said it can’t acquire customers in the same way.

You want to make sure you regularly look at your LTV or CAC by channel, so you know which channels are more cost-effective than others and how they work together. 

If you put more spend into channels that appear cost-efficient, does that drive increased users or revenue? Or does it reduce the effectiveness of other stages of your funnel? You can only know what’s true if you’re willing to experiment with your channel mix. 

If you’re seeing challenges at the top of the funnel, you may want to explore awareness-driving tactics that you haven’t tried before—whether that’s PR, newsletters, or even new social channels—and decide whether that can produce more awareness and consideration. Or if you’re struggling to retain customers and create repeat behavior, you might want to start exploring community tactics or loyalty programs.

Experiment within your lean marketing budget the smart way

Wherever you’re looking to improve, it often makes sense to create a separate fund for experimentation that’s free of established investment thresholds. With looser rules for your experiments, you free up your team to focus on first learning which new channels have potential. If a channel shows promise, you can continue to optimize, and then create investment rules and operational efficiency once you’ve established some baseline metrics.

There is an important caveat here—you must have clear investment rules, such as how many months of payback you’re targeting, and granular channel data that you have access to and can use for audience development. If you’re using a blended CAC, now is the time to stop. It can hide all sorts of problems in your marketing mix. 

Looking at channel performance to inform experimentation and make data-led decisions will give you flexibility to adapt your spend through all points of the business cycle. There’s no “one size fits all” approach for crafting a lean marketing budget as it will depend on your company’s growth, stage, and overall performance, but if you can find channels that yield sustainable marketing-led growth, you’ll give yourself some breathing room.

Don’t Lose Sight of Your Brand

One of the first things that many marketers cut during down times is brand spend, particularly in channels where it’s less measurable.

It’s an attractive idea—the budgets are large and the results are (often) ambiguous. But don’t fall prey to this short-term proposition, which often causes harm in the long run.

If you can increase (or at least, maintain) your brand spend while everyone else is cutting back, you’ll be rewarded with disproportionate market share. Harvard Business Review notes that during a recession, “even cash-poor firms would be wise to commit a substantial portion of their marketing resources to reinforcing the core brand proposition.”

Virgin Atlantic famously launched an anniversary brand campaign during the height of the 2008 recession that drove a disproportionate return on investment, as did diamond company DeBeers. 

The trick to making this work is that you have to increase your targeting to the right type of customer or adapt your approach to find value in your media. It may be a new brand channel, a new location, or a message that focuses on a different part of the buying journey.

You’ll need brand awareness before, during, and after a downturn, so make sure you plan accordingly. Brand spend is an investment, not an expense. 

Retention is a Team Effort

All too often marketers worry about getting customers in the door and then don’t think about them again. If they churn, that’s because something is wrong with the product.

The truth is that retention is a team effort and putting the responsibility on any one team might cost you more than you realize. You’ll need your analytics team to help hypothesize causes of churn, design and marketing to work up alternative flows and copy that can keep customers, and product and engineering to implement any changes.

When customers churn, they decrease the overall LTV of a cohort of customers, create a customer gap that marketing teams scramble to fill, and increase the overall cost of acquisition.

Use this opportunity to check how you present your value proposition at every customer touch point after conversion. At Wise—where price was one of the core components of our value proposition—we reinforced our value in general terms as well as in detailed terms. We showcased how our price stacked up against competitors on landing pages, as well as when users made a transfer.

If people use your service because it’s cheap, fast, and convenient, are you surfacing that information on your home page, as well as lifecycle emails, success screens, and more? 

By flexing your product marketing muscles this way, you’ll find legacy mistakes that need to be corrected, optimize messaging, and deliver better retention.

Get to Know Your Customers and Their Changing Needs

Not all of your customers will continue using your product during an economic downturn. This can be true in B2C (depending on your product and price point) and it’s almost certain in B2B.

Your customers that are still buying are gold—find out why they’re still spending. Did they find out about you through a specific channel? Pour money into that channel. Did one particular message resonate with them at a certain point in the buying cycle? Reduce your touch points and funnel customers to that point in your sales funnel. 

The same is true of customers that don’t convert. If you find a segment of prospective customers isn’t buying, find out why. You won’t be able to keep turning these people into customers at scale, because price is likely a key factor. But chances are you’ll find an insight that helps inform whether you should maintain your brand spend, reduce bottom of funnel programmatic activity, or something else.

In the first wave of social media innovation, Foursquare started somewhere between Yelp and Twitter, letting people check in to local businesses. It turns out that the people who were actually willing to pay for that service were other businesses that wanted to utilize the platform’s location data. If Foursquare hadn’t understood this emerging use case, they would’ve stopped growing long ago. Pivots matter, especially when it comes to revenue. 

By gaining deeper knowledge of your customers, you’ll be able to segment them with more rigor. This will allow you to ramp up acquisition spend on groups that deliver an acceptable ROI and slow down on groups that would otherwise blow out your lean marketing budget.

Solve Your Customers’ Problems to Unlock Growth

Marketing is one of the most powerful ways to grow your business, even during a downturn. However, it takes discipline and focus. If you’ve never led a marketing team through the murky waters of a shaky economy, make sure you and your team are ready to do the hard work of understanding your customers’ problems and where your company and brand can offer solutions.

If you understand how you solve a customer’s pain, you’ll know how to attract, convert, and retain those users. The rest—whether it’s getting tight on your numbers or expanding your marketing channels—is just optimization.

Do you need help crafting a marketing budget that drives growth while keeping you competitive during economic challenges? The experts at Right Side Up can offer their real-world tested insights on how to make it happen. Get in touch at growth@rightsideup.co to get started.